The Monetary Policy Committee (MPC) is meant to meet on June 11 and 12 to discuss whether or not interest rates in South Africa should remain where they are or they should be raised. Most signs point to the MPC deciding to increase the interest rates by as much as 100 basis points in order to try curb the ever rising inflation. CPIX inflation is currently sitting at 10.1% year-on-year with the latest statistics being released next week Wednesday (28 May).

Many analysts are predicting that the CPIX will be higher than 10.1% with some thinking that inflation will now stand at 11%. This will put added pressure on the MPC to increase interest rates. It would not be surprising if the MPC pushes their interest rate decision forward to the same day after the inflation statistics have been released rather than waiting for June 11 and 12. Reserve Bank governor, Tito Mboweni had indicated before that an emergency meeting may have to be made to try stop the rising inflation rate.

The question may not be if the central bank is going to increase rates but rather, by how much? And the likelihood is that this may not be the last interest rate hike for the year, they may be 2 or 3 more hikes for the rest of 2008.

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